German technology and engineering group Bosch, which is the world’s largest supplier of auto parts, believes the automotive industry’s semiconductor supply chains are no longer suitable for the purpose of global shortages. of chips.
Harald Kroeger, a board member of Bosch, told CNBC’s Annette Weisbach in an exclusive interview Monday that supply chains have shrunk over the past year, as demand for chips throughout, from cars up to PlayStation 5 and electric toothbrushes has increased worldwide.
Coinciding with rising demand, several key semiconductor manufacturing sites were forced to stop production, Kroeger said.
In February, a winter storm in Texas caused blackouts in NXP Semiconductors, a major supplier of chips for cars and cell phones. In March, a fire broke out at a semiconductor plant in Japan, operated by Renesas, a major supplier of chips to the automotive industry. In August, factories in Malaysia have been abandoned as national closures were introduced to reduce the spread of coronavirus.
Volkswagen, BMW and Audi reduced their production as they struggled to get the chips needed to build their cars. These semiconductor companies and suppliers should now try to figure out how the chip supply chain can be improved, Kroeger said.
“As a team, we have to sit together and ask, because the future operating system is a better way to have longer delivery times,” he said. “I think what we need is to have more stock in some parts [of the supply chain] because some of these semiconductors need six months to occur. Cannot run on a system [where] every two weeks you receive an order. That doesn’t work. “
Semiconductor supply chain problems have been quietly handled by the automobile in the past, but now is a time for change, according to Kroeger.
Bosch has built a new 1 billion-euro ($ 1.2 trillion) semiconductor plant in Dresden, the capital of the German state of Saxony and one of the largest semiconductor clusters in Europe, in the last two years. production began last month.
“The fact that we actually started building this plant a couple of years ago shows that we expected demand to increase dramatically,” Kroeger said.
Other heavyweight chips, including Intel and TSMC, plan to establish new factories in the coming years as part of an effort to boost production.
Kroeger said he expects the shortage of chips to extend “until 2022,” adding that he expects demand to remain stable. “We need to increase supplies to be able to meet that demand,” he said.
The struggle for sovereignty
German President Frank-Walter Steinmeier told CNBC this week that the plant is coming at a crucial time for the industry, adding that Germany and Europe are still a long way from achieving digital sovereignty in semiconductor production.
“It is important and right that Bosch has chosen to invest here at a time when we are seeing supply shrink in international markets,” he said during a visit to Bosch’s new facility.
“I think the current situation gives us an extra boost to be stronger in this field,” Steinmeier added.
The number of people working in the semiconductor sector in Dresden has increased from 45,000 to 70,000 in the last decade, according to Frank Bosenberg, CEO of the Silicon Saxony technology network.
“We expect new growth by 2030 of up to 100,000,” Bosenberg told CNBC.
Catch up with Asia
The vast majority of chips in the world are produced in Asia, with TSMC being the largest chip producer worldwide. Europe accounts for only a fraction of world semiconductor production.
“Europe has 20% demand and less than 10% production right now,” Bosenberg said.
He thinks Europe should increase semiconductor production, but noted that it is a global industry and that no country is even close to being autonomous.
The Dutch semiconductor equipment vendor ASML is the only company in the world capable of manufacturing the machines needed to manufacture the most advanced chips, which are used by people like Apple.
ASML is an “important asset within the industry,” Bosenberg said.